By Nicholas Santiago on August 24th, 2010 10:28am Eastern Time
Regardless of what the government says the market action has been weak. The powers that be such as the U.S. Treasury and the Federal Reserve Bank (U.S. Central bank) must be shaking their heads wondering what they have to do next in order to inflate these markets again. Since late April 2010 the major stock market indexes have continued to decline. Sure, there have been small rallies along the way, however, the declines seem to continue. This action in the market regardless of what the positive talking heads in the media are saying is very bearish. Please remember the stock market leads the economy. It is not the other way around. The economy does not lead the stock market.
The market indexes are now getting short term oversold after today's morning decline. Therefore, bounces are very possible and should not be a surprise if they do occur. Rarely does the market ever trade up or down in a straight line. Recently the merger and acquisition activity has heated up and this is usually short term bullish for the overall markets. However, the market indexes did react very positive to all the takeover news. This tells us that something bigger is going on when the market cannot bounce or rally on positive news.
Today the markets are having a broad based decline. However, if the U.S. Dollar Index declines this could help to inflate the major stock indexes off the lows. This morning the U.S. Dollar Index was trading higher by 0.20 cents and now it is trading flat on the session around $83.12. Please realize that when the dollar declines most commodity stocks will bounce higher and help lift the stock market indexes. The U.S. Dollar chart in my humble opinion is one of the most important charts in the entire stock market.
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